Category Archives: Banking

The National Debt was basically flat from A.D. 1900 through A.D. 1971. In A.D. 1971, President Nixon closed the “gold window” and the dollar became a pure fiat/debt-based currency. Since A.D. 1971, the National Debt has persistently increased, without regard to which political party controls the government. I strongly suspect that a debt-based monetary system cannot survive without government creating more debt. Once the dollar was debt-based, the National Debt had to increase.

The Congressional Budget Office (CBO) recently released a 55-page report on the “long-term US budget outlook”. The report implied that the US government is on the road to fiscal chaos and possible collapse that could not be sustained beyond A.D. 2047.

I think the CBO is lying about the “long-term” budget outlook. Instead, I think we’ve only got a “short-term” to go before the debt hits the fan.

According to the report, the “official” National Debt($20 trillion) currently stands at the highest level since shortly after World War II. (The report did not comment on estimates by others that, including unfunded liabilities, the real National Debt may be closer to $100 trillion or even $200 trillion.) According to the report, if government maintains current policies and economic trends continue, the debt will likely double over the next 30 years, rising to about 150% of GDP.

I see the CBO’s predictions and “warnings” as bunk, bunk, and, uh, bunk.

I’m not a real-estate student or investor. Nevertheless, the following video was produced from a real estate agent’s perspective by the NREP (National Real Estate Post). The video describes an ongoing revolution that involves “smart phones” and “mobile only banks”.

According to the video, there are now ten banks in the world that are “mobile only”. That means these banks have no vaults, no tellers, no ATMs, or branch offices. You can’t even access these banks by means of your desktop computer. They are only accessible by means of smart phones.

As I said, “mobile only” banking marks a revolution. This revolution points towards a purely digital, global currency. The question is, can this “revolution” withstand the dangers of digital currency, digital banking and hackers?

The fundamental premise underlying negative-interest rate bonds is that lenders pay government borrowers for the “privilege” of lending to government. Based on this premise, governments receive loans at less than the face value of the bond. For example, if you loaned $100,000 to the government on a negative-interest loan, you might only receive, say, $98,000 when you redeemed that bond. You’d lose $2,000 for the privilege of lending to the government.

In all of world history, I doubt that there’s ever before been a time when lenders paid borrowers for the privilege of lending money.

The world is embracing negative-interest rate bonds for the first time. That fact is not evidence of economic creativity and financial innovation so much as evidence of desperation and the financial madness that lies at the heart of debt-based monetary and economic systems.

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A few facts about negative-yield bonds:

• According to Bank of America Merrill Lynch, the global amount of government bonds having negative yields is now $13 trillion,.

• Just two years ago, there were virtually zero negative-interest rate bonds. The subsequent, two-year rise to $13 trillion is unprecedented.

• In February A.D. 2015, the total amount of negative-interest debt was $3.6 trillion.

• By February A.D. 2016 that negative-interest debt had nearly doubled to $7 trillion.

• In the five months since February, A.D. 2016, the amount of negative-yielding bonds nearly doubled again to $13 trillion.

• The spread of negative-yielding bonds is unprecedented, fantastic and accelerating.

The “Great Recession” of A.D. 2008 was triggered by the systemic failure of Collateralized Debt Obligations (CDOs). These CDOs failed because they were supposed to composed of AAA-rated mortgages, but were, in fact, full of “sub-prime” adjustable-rate mortgages. Many of these sub-prime, adjustable-rate mortgage were virtually guaranteed to default when their “adjustable rates” were adjusted upward in A.D. 2007.

And that’s just what happened. The adjustable mortgage rates rose in A.D. 2007. Sub-prime mortgagors began to default on their mortgages and the CDOs began to collapse. Result? The U.S. and global economies nearly collapsed into an depression.

As many of you may know, The Big Short is a motion-picture that describes the causes and chaos that engulfed Wall Street when the CDO’s failed. I don’t think the movie is for everyone, but it should be. It provides a very realistic insight into how big-time, wheeler-dealer business (especially on Wall Street) is actually conducted.

Even though most people won’t watch the whole movie, the film strikes me as brilliant.

I could draw a number of lessons from the film, but one that crosses my mind is something about the dangers of salesmen. Salesmen know how to sell. That knowledge of how to sell is often unsullied by any need to understand the nature of whatever product is being sold or the ethical consequences to others if the sale is completed. From the salesman’s perspective, the objective is make the sale by any means necessary. There’s no question of ethics or morality. Make the sale, get the money and head for a topless bar.

I don’t suggest that every salesman is unethical. I do suggest that most “big-time” salesmen of the sort your find on Wall Street and in Congress are immoral.

As I view it, The Big Short shows what happens when major banks, corporations and governmental institutions are ultimately run by salesmen rather than by managers (who actually have some understanding of their products and perhaps even the moral consequences of selling those products). The amoral salesmen pushing the CDOs in the early 2000s were getting fabulously rich but had no clue to the contents of the CDOs they were selling. In the end, the sale of CDOs was much like the Dutch “Tulip Mania” of A.D. 1637 when investors went wild buying nothing more than some lousy flowers. Even though the CDOs were intrinsically worthless, virtually no one knew or bothered to inspect them.

The Big Short a great film. It’s an A.D. 2015 release, so might be quickly pulled off the internet for copyright violations. If you want to see it, you should watch it as soon as possible.

“Today, we see China, Russia, India and others are moving to protect themselves from the systemic risk of the over-printed dollar. It’s become clear to many that the dollar’s world-reserve-currency status cannot last. It’s just a matter of time before the entire currency system will face a radical resetreflecting today’s reality.”